Indian Court Blocks WazirX from Using User's XRP to Cover Hack Losses

Indian Court Blocks WazirX From Using User’s XRP to Cover Hack Losses

The Madras High Court in India has made a pivotal ruling recognizing cryptocurrencies as property under the law, providing digital assets with definitive legal status for the first time in the country.

Key Takeaways:

An Indian court has acknowledged cryptocurrencies as legally recognized property in India.
WazirX has been prohibited from redistributing a customer’s 3,532 XRP to cover losses from its $234 million hack.
This decision underscores that assets held by exchanges belong to the clients, not to the exchange itself.

The ruling follows the court's decision to stop WazirX, India’s largest cryptocurrency exchange, from reallocating a user’s 3,532 XRP as a means to address some of the losses from a $234 million hack that occurred in July of the previous year.

Landmark Ruling: Justice N. Anand Venkatesh on Crypto as Property

Justice N. Anand Venkatesh stated that the user's holdings, which were acquired months before the hacking event, cannot be seized based on the exchange's plan to “socialize losses.”

He remarked, “It is not a tangible property nor is it a currency. However, it is a property, capable of being enjoyed and possessed in a beneficial form.”

This ruling confirms that crypto assets held by exchanges are to be treated as property owned by clients rather than assets that can be allocated at the exchange's discretion. The court dismissed WazirX’s plan to share the loss among all customers, equating it to “a group insurance of a self-help group.”

The judge emphasized that no such term existed in WazirX’s user agreements, rendering the proposal unenforceable under Indian contract law. Furthermore, WazirX contended that its Singapore restructuring plan, approved by foreign creditors, automatically applied to Indian users; however, this argument was rejected by the court.

The judgment reinforces that Indian customers are protected under local consumer and property laws, even if exchanges operate through offshore entities. This ruling adds to a series of Indian court decisions elucidating user rights in crypto custody cases, including a previous verdict from the Bombay High Court against a similar policy by Bitcipher Labs earlier this year.

WazirX Resumes Operations Following $230 Million Hack

On the same day as the ruling, WazirX restarted limited operations after receiving 95.7% approval from creditors, although users are currently able to access only 30% of their funds due to ongoing withdrawal and verification issues.

As of October 24, WazirX has officially resumed operations after more than a year of restructuring following the $230 million hack that took place in July 2024. The Singapore High Court recently sanctioned the exchange’s debt restructuring plan, paving the way for a gradual relaunch.

Initially, WazirX will reopen trading for select crypto-to-crypto pairs and the USDT/INR market, with more listings anticipated in the coming days. Founder Nischal Shetty confirmed that INR and crypto deposits are now live, with withdrawals to follow shortly.

In an effort to lure users back, WazirX announced zero trading fees across all pairs during the relaunch. Shetty emphasized, “At the heart of everything we do is our mission to make crypto accessible to every Indian,” and pointed out that the exchange is dedicated to regaining user trust and rebuilding liquidity.

WazirX is also set to issue Recovery Tokens to creditors, representing each creditor’s share of the lost or frozen assets, with distribution expected within 10 business days.